Microsoft to Launch Retail Stores

Discussion
Feb 16, 2009
Tom Ryan

By Tom Ryan

Borrowing a page from
Apple’s playbook, Microsoft plans to open Microsoft-branded retail
stores. Although details were limited, Microsoft said the stores’ purpose
will be to "create deeper engagement with consumers and continue to
learn firsthand about what they want and how they buy."

To head the initiative,
David Porter was hired as vice president of retail stores. He spent 25
years at Wal-Mart Stores before joining DreamWorks Animation SKG in 2007
as head of worldwide product distribution. His last role at Wal-Mart was
vice president and general merchandise manager of entertainment.

Microsoft said the first
priority of Mr. Porter would be to define where to place the Microsoft
stores and when to open them. The stores could feature a range of products
from personal computers running its Windows operating system to cell phones
running the company’s Windows Mobile operating system to its Xbox videogame
console.

"This is an exciting
time with our strong lineup of upcoming product releases including Windows
7 and new releases of Windows Live and Windows Mobile," said Microsoft
chief operating officer Kevin Turner.
"We’re also working hard to transform the PC and Microsoft buying experience
at retail by improving the articulation and demonstration of the Microsoft
innovation and value proposition so that it’s clear, simple and straightforward
for consumers everywhere."

But many questioned the
timing of the launch during a recession, as well as the potential to alienate
retail distributors. OEM partners might become rankled at how their wares
are showcased in the stores. The failure of Gateway’s retail venture as
well as Microsoft’s own attempt to open a store in 1999 was also widely
cited.

A lot of the criticism
focused on the challenges of competing against Apple’s stores and their
hip design, helpful staff and "genius bars."

In a research note, Allan
B. Krans with Technology Business Research said
the introduction of Apple stores was helped by the launch of the iPod but
Microsoft doesn’t have a similar traffic driver.

"Microsoft is putting
the cart before the horse," wrote Mr. Krans. "Stores
do not draw consumers to products; innovative products bring consumers
into stores."

But writing
on Silicon
Alley Insider
,
Dan Frommer saw potential benefits in showcasing all of Microsoft’s
products in one place. He wrote, "At
very least, they could do a better job than Best Buy at showing off PCs."

Discussion Questions:
What do you think of Microsoft’s move into retailing? What would be the
key to Microsoft’s success in retail?

Please practice The RetailWire Golden Rule when submitting your comments.

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39 Comments on "Microsoft to Launch Retail Stores"


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Dr. Stephen Needel
Guest
11 years 4 months ago

Clearly a company with too much cash on its hands. I think they’d be much better off by partnering with the big retailers (Walmart, Best Buy, etc.) and creating a “Microsoft Innovation Center” area/kiosk which shows off their stuff.

Cathy Hotka
Guest
11 years 4 months ago

What an interesting concept. Imagine a Microsoft store that shows the products that consumers rarely see, like Microsoft Surface….

The respondents here who have mentioned customer feedback are right on. This is MSFT’s big opportunity to tap into their customer base, which is more important than ever in the age of cloud computing. If they open, I’ll visit!

George Anderson
Guest
11 years 4 months ago

An unofficial poll of some seven or eight 15 and 16 years olds last night to the question of whether they’d be interested in shopping at a Microsoft store brought one particularly interesting response accompanied by a lot of nodding heads. One kid said, “I hope they’re going to sell iPods too. Who wants a Zune?” Not a good sign.

Michael Boze
Guest
Michael Boze
11 years 4 months ago

I think the key to understanding the success or lack of of success of Microsoft’s venture into retail storefronts has more to do with their distribution strategy for their products. If this is a major shift in distribution practices, I think the outcome would be very different than a strategy to use retail storefronts to showcase the brand, which makes good sense to me.

Phillip T. Straniero
Guest
Phillip T. Straniero
11 years 4 months ago

I think the Microsoft entry into retail is all about the reversal of negative press and comparative advertising associated with it Vista product.

It would seem to me that people will welcome the opportunity to receive first-hand expert consultation about Microsoft products on a one-to-one basis. That being said, it will be imperative that Microsoft have a rather large and very well-trained staff in these retail outlets to meet the perceived expectations of their customers.

I would also expect that people will want to spend a considerable amount of time speaking with the Microsoft retail people and the waiting time will equal or possibly exceed what is seen in many cell phone retail stores.

I think this will be a rather interesting entry into the retail marketplace.

James Tenser
Guest
11 years 4 months ago

Count me in the cautiously positive camp regarding the potential for an Micro-Store. To win big with this, Microsoft will need to define its own flavor of cool, and not try to echo the Apple experience.

But there’s great potential in demonstrating hands-on the inter-activity of various Windows devices–from laptops running Windows 7 to smart phones running Windows Mobile to commercial applications like Surface and even the much-maligned Zune music player (why not just build it into the phone software?).

Microsoft urgently needs a platform to show end users how its applications can deliver a high-quality experience running on the latest devices. Yes, it’s a naked marketing/PR maneuver. But who cares if the Micro-Stores don’t move a large volume of merchandise? The goal is to move hearts and minds. Hiding out in Redmond won’t persuade anybody. Showcasing one’s best in a public space might.

Dennis Smith
Guest
Dennis Smith
11 years 4 months ago
Nikki Baird and Don Delzell both hit the nail on the head. Apple stores are service centers. There, customers can gain confidence that their new software will empower them in the way they expect because there is an expert backup team at the store to help with problems. That confidence translates into sales of software which, with Apple, often comes bundled in hardware. Microsoft software products also, in varying degrees, come bundled in hardware. So the store must offer that hardware to provide a complete customer solution. That puts them in direct competition with their best retailers. That’s not a problem for Apple which enforces uniform pricing. From what little we know so far, it appears these stores will be more comparable to Sony’s “Sony Style” stores. They accept a competitive pricing disadvantage in order not to offend their major retailers. Exciting prospect, isn’t it? I can’t imagine a Walmart veteran spearheading a service operation, which I see as the only way the stores will be profitable. Apple diverts all the energy normally burned on… Read more »
John Gaffney
Guest
John Gaffney
11 years 4 months ago

David Porter. 25 Years at Walmart. ‘Nuff said.

Kai Clarke
Guest
11 years 4 months ago

Once again, MS decides to ignore their previous history and venture into an area where almost everyone in this environment fails. They are trying to copy Apple, when we really don’t know that Apple’s stores are successful (let alone profitable), and MS is venturing into an arena where they have no expertise (retail stores) as well as taking on a huge debt burden with the hardware that they will need to carry (that is not necessarily theirs), depreciate and update.

Worse yet, MS is straying from their core competency (software) and are opening retail stores at a time when all retail is faltering. Getting consumers into their new stores doors will put MS in competition with all of their software partners who are also doing the same thing. How will Best Buy, Cosco, Walmart and others feel when they are competing against their supplier (MS) for the same customer?

Joel Rubinson
Guest
11 years 4 months ago

The opportunity for Microsoft to deliver an experience that will transform their image is amazing. Microsoft can regain ownership of cool by demoing some of their new technology that few are aware of yet. This is a brilliant idea.

Anne Howe
Guest
11 years 4 months ago

If Microsoft does this right, they could get a great opportunity to talk with consumers instead of at them. That in itself is a step in the right direction in terms of innovation. What they do beyond step one will be important. Listening is key, but more important is translating what they hear into market-leading products without all the glitches!

Ralph Jacobson
Guest
11 years 4 months ago

I once went to the retail store on campus in Redmond, and it was always busy. This is a tough time to think about launching a new retail chain. However, the marketing engine of MSFT could make it successful. Just as Apple has a following of people who just want be be seen in the store, or just want to work in the store, I believe MSFT will have a similar group of constituents. MSFT needs to learn from the global best practices of what works in order to make a sustainable business. There are plenty of case studies from which to learn.

Kevin Graff
Guest
11 years 4 months ago

As with many new ventures, this one is ripe with both possibilities and potential failures. No doubt, many will jump on the doom and gloom side of the argument, so let’s take the positive side for a moment.

Deep pockets, brilliant management and a terrific (in spite of a few bugs) line of products make for a very plausible retail business. Microsoft has been getting kicked around in the media lately, so this is a great opportunity to control their own brand. If they can (and I think they will) showcase it as well as Apple does, and create a great shopping experience (it’s not hard to Wow most customers with technology) they’ll do well.

Right now, it’s hard to even grasp Microsoft’s full range of products because of how they are shown in other retail stores.

There’s little sense of what their products can really do. I’ll look forward to seeing their stores. And, to reading what the naysayers have to say.

Nikki Baird
Guest
Nikki Baird
11 years 4 months ago
I have plenty of critique to offer Microsoft, but I actually think opening retail stores is a good idea for them. Microsoft needs to be clear about its intentions in order to reassure channel partners–i.e., the plans are to open just a few stores at first (hopefully). But for any manufacturer that has a hard time getting a fair crack in the retail channel, there is an advantage in opening some stores: to better understand how consumers engage with your products in stores, to better understand what the manufacturer needs to do to present its products in stores, and to give products or product combos a shot at the shelf that might not otherwise make it into mass-market distribution. On a personal note, I would LOVE to see the Microsoft equivalent of the Genius Bar, so that I can go in and pester them with all of the bugs that continue to exist in their products. Which is an important reminder: all snide remarks aside about competing with Apple, if Microsoft goes through all of… Read more »
Liz Crawford
Guest
11 years 4 months ago

Microsoft needs to step carefully. Too much like Apple Stores and they will be a second-rate “wannabe.” The timing is tricky too–consumers are closing their wallets for the time being (and the unemployment rate keeps climbing).

However, I believe there is room for this idea. Execution with meaningful points of difference will be key. I imagine a few flagship stores, which work as showcases and pilots, would be prudent first step.

Dan Gilmore
Guest
Dan Gilmore
11 years 4 months ago

Apple, for a number of reasons, has been able to create an incredibly “cool” image, and their stores reflect and reinforce that.

Microsoft, in general, has a very stodgy, corporate image, and its Windows Vista has in general been a big dud.

So, it is looking for something that can put some cool in the Microsoft image.

The challenge, I think, is that other than XBox, Microsoft really doesn’t offer any hardware. So Microsoft, I assume, will have to use its computer and consumer electronics “partners” to fill up the store. So, what will the stores be like–mini-Best Buys, with just the latest/coolest stuff? Will I be able to order, say an HP laptop, in the MSFT stores?

I understand the need, but the execution will be very tricky.

Charlie Moro
Guest
Charlie Moro
11 years 4 months ago

One thing that may be interesting is the manner in which Microsoft tries to make the Windows experience fun and interactive. One thing Apple has done is to create a culture of “fun and interesting” around their products where all Microsoft has had is Vista.

Lisa Bradner
Guest
Lisa Bradner
11 years 4 months ago
The opening sentence says it all “taking a page from Apple’s playbook….” Apple and Microsoft are very different brands with very different reasons for being. Apple has always been niche and design centric and it embraced those brand badges in its products and its retail concept. Microsoft really is PC guy–and there’s nothing wrong with that. We all need PC guy and we need him to work and we need his help and his expertise–even if he is a little dull and long winded sometimes. But does anyone really want to be seen hanging out with PC guy in the mall? I think MSFT will find that the retail stores become a customer-service nightmare of people dropping in to solve their operating system’s problems or to rant about what isn’t working on their home PCs. Given the capital outlays associated with a retail store, it seems to me that Microsoft would be better served by going back to their initial concept of offering support and customer service inside Best Buy and other retailers. Yes, they’d… Read more »
Matt Hahn
Guest
Matt Hahn
11 years 4 months ago

Microsoft’s strategy of late seems to be “Follow Apple.” It’s a little disappointing that there’s a lack of innovation coming out of the Seattle area. Microsoft’s store will now be measured against Apple’s and an entirely new format that further engages and excites the consumer. The scrutiny will be tough, but Microsoft needs to deliver in a big way. Maybe multi-touch walls running Windows 7 interfaces that wirelessly interact with the customer’s Zune or helps them create their Live Life. There are a lot of possibilities, so we’ll see how well they execute.

Doug Pruden
Guest
Doug Pruden
11 years 4 months ago
The release says that Microsoft’s purpose in opening these stores will be to “create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy.” I hope that means that: 1) they don’t plan on making money on sales in these stores and, 2) they will have a process created and in place before they open the first door to capture, and make full use of the customer feedback they receive. In other words that they will be judging success here by something other than a traditional retail P&L model. I always believed that you opened stores because you needed to allow customers to try-on, taste, touch or take delivery of your physical product. Unless Microsoft is going to be presenting some new physical products, and not software, it appears that they are going against the tide of delivering services and product demonstration online whenever possible. I would think they would be better served by inventing the new online form for product demo and capturing customer feedback rather than… Read more »
Marge Laney
Guest
11 years 4 months ago

You know, I hope Microsoft does this in a big way. They will get my business. My friend has an iPhone. She needed to ask a couple of questions about her plan so we went to the mall. We were greeted and told to go make an appointment to talk to the service guy. I don’t like walking into a store where I have to make an appointment to talk to someone…. “I can connect you with an associate at 1:15 today, does that work for you?” It’s 10:30 uh, no. Everything about the Apple store experience (except service) is spot on. But, I don’t own an Apple product. What about me, the PC user? I think Microsoft is savvy enough to figure it out, and I’m looking forward to it.

Mark Lilien
Guest
11 years 4 months ago

If Microsoft is smart, they’ll roll out the stores very slowly, learning as they go, until they get the results they’re seeking. Some of the comments are focused on Microsoft competing against other retailers, but Apple stores compete against independent Apple retailers, too.

Microsoft would be smart to improve the reliability of its software, and design simplicity for the users. Its position is like GM in the 1960s: uneven product lineup, great market share and financial momentum, lots of defects, hubris beyond measure. The Zune? Vista? The Blue Screen of Death?

Bob Phibbs
Guest
11 years 4 months ago

Apple knew who it was and who their customers are, then contacted the folks who trained the Ritz-Carlton employees to come up with a culture that matched theirs. It is telling Microsoft contacted a former Wal-Mart Exec to create theirs. For more thoughts on what makes a great brand please visit my blog.

Joel Warady
Guest
Joel Warady
11 years 4 months ago
There are a couple of interesting things to note here. First, since Microsoft does not produce its own hardware, they will be featuring their software products. And their software products are not all that exciting. I can’t imagine a group of Net-gen kids wanting to run to the Microsoft store to see the latest version of Excel or Word. Sure they do a great job with video games; but I’m not sure that this is enough to sustain a retail chain. But what is interesting is that last week, Apple announced that they are revamping their stores this month to focus more on the software that they produce, and less on the hardware. Apple feels their strength is comparing their software with Microsoft, and illustrating the great, creative things that you can do with Apple software, that are a lot harder to achieve with Windows software. Once again, it seems that Apple has beaten Microsoft to the punch. Finally, if I want to be seen as cutting-edge, and hip, cool, and creative, the last person… Read more »
John Crossman
Guest
John Crossman
11 years 4 months ago

I like the idea. This will provide existing customers with more service and expose them to new customers. Now is a great time to be a tenant that is expanding.

Art Williams
Guest
Art Williams
11 years 4 months ago

I love software but this sounds very boring to me. I have to learn more about what it would offer before I can get very excited. If others share my excitement, it doesn’t bode well for this store’s success.

Gene Detroyer
Guest
11 years 4 months ago
The Apple Store on Fifth Avenue in NYC is a tourist destination. It is a cool place with cool products. People don’t visit the store because they are necessarily Apple fans, but to experience the excitement of what Apple has to offer. Microsoft is a different company. I can’t imagine someone passing by and say, “Gee, what’s hot in there?” If Microsoft does move ahead with a retail concept, it must be entertaining and compelling. If it is the same old Microsoft, the message that visitors leave is that “It’s the same old Microsoft.” That conclusion will likely hurt them. They seem to have picked the right kind of person to lead this effort. Porter comes with an excellent combination of experience to keep this effort focused in the right direction. But, that will not mean it’s a easy task. Imagine if Microsoft opened retail stores just ahead of the Windows Vista introduction. Would the retail effort have been focused on Vista? If so, would that have accelerated the Vista debacle? I am not an… Read more »
Dick Seesel
Guest
11 years 4 months ago

To Joel’s point: What products will Microsoft sell in its own stores? Its attempts at hardware (think Zune) have been a pale shadow of Apple’s efforts. Its software is ubiquitous but becoming less relevant in the world of Firefox, online apps, and other competition. So Microsoft needs to think long and hard about the content of its stores before moving in this direction.

Lee Peterson
Guest
11 years 4 months ago

Wonder what happened with the very cool Microsoft store that was in San Francisco’s Metreon Center?? The store, which opened almost 9 years ago, was always busy, had a great vibe to it and was unique to boot. Something always told me that it was not successful enough, or there’d be many more of them.

Anyone know the history of that store? Why they didn’t open more, etc???

Jeff Hall
Guest
11 years 4 months ago

I can appreciate how Microsoft desires to engage more directly with its customers, however, I don’t see these retail stores achieving anywhere near the “destination” status as Apple enjoys.

If Microsoft is adept at choosing its hardware partners (perhaps Dell or HP?), and can showcase both exciting hardware and software, they might just benefit from a multiplier effect in attracting consumers to test drive products and software.

Stephen Baker
Guest
11 years 4 months ago
As with anything around Microsoft, there is good and bad and a lot of emotional baggage. But a few things to be clear here. First is that this is clearly going to be a Microsoft and partner store, as they have demo’d privately with their Windows Experience store. The idea is to promote and sell the windows ecosystem, not Microsoft products only. Second, who cares what the economy is today? It is not like they are going to open 75 stores in a year. Expect them to gradually ramp up as any smart company would, changing and experimenting along the way and stopping and restarting to incorporate with they have learned. Third, anyone who says Microsoft should just open a store-within-a-store in Best Buy or some other retailer doesn’t really know consumer electronics selling at retail. Of course it would be cheaper and easier to just throw money at the retailer and implement that in their store. But no US electronics retailer has ever fully embraced that concept because of the brand dilution it causes… Read more »
Don Delzell
Guest
Don Delzell
11 years 4 months ago
I believe this venture must be explored as a marketing expense, in the same way Nike’s original group of retail stores served as a brand touchpoint. One aspect of the Apple model worth mentioning for Microsoft is the Genius Bar. In case you haven’t been to a store or tried to use the Genius Bar, they are almost completely utilized almost all the time. Not only does this generate traffic, by definition it also generates satisfied customers. Each Genius Bar customer who has his or her problem resolved experiences the Apple brand connection. Imagine if there was a place you could get immediate, qualified, and effective answers and solutions to your Microsoft-based problems? OK, many of those are simply glitches in the badly tested software…but with patches released daily, wouldn’t it be cool if you could be told exactly which patch to download and how? Beyond that, Microsoft DOES have some cool stuff. Beyond xBox and Zune…remember the Table? I get periodic press releases about exciting stuff coming out of Redmond which may or may… Read more »
Doug Fleener
Guest
11 years 4 months ago

After reading about Microsoft’s plans I keep singing the Doobie Brother’s song, “Taking It to the Streets.” I think it can work as long as they’re clear on what they want to achieve with the stores and deliver a great store experience.

I don’t think they should try to be another Apple, but rather create their own retail presence. Then again since they’re basically a software company, I don’t think they can create an Apple type of store. They have a lot of money and lot of time to get it right, so I sure wouldn’t bet against them.

Anne Bieler
Guest
Anne Bieler
11 years 4 months ago

One of the first things that come to mind is, who are the target consumers they are trying to reach? I’m thinking an underserved group who might go to a retail outlet are all the home office/small business and family networks–looking for better solutions and software advice. Software direction from big-box stores is not part of the offering. Office Supply centers are trying to fill the gap by offering in-store support services…much could be done. Thinking long and hard about target consumers and locations is key; solid execution is essential.

Marc Gordon
Guest
Marc Gordon
11 years 4 months ago

Wow, this is certainly a coin toss. From all the other posted comments, it’s obvious that people are aware of the hurdles the brand identity will have to overcome in relation to Apple. But for me, the big issue would be the other retailers and big-box stores.

I can’t see Best Buy being too happy about having to compete head on against its own supplier.

I wonder if the sales associates would introduce themselves by saying “Hi, I’m a PC.”

Marty Walker
Guest
Marty Walker
11 years 4 months ago
I’m respectfully a bit disappointed in some of these responses from professionals that get their bread & butter from the retail world, to presume and prejudge what’s motivating Microsoft to get in the street retail game, rather than enthusiastically ponder what could or might come from this market giant. God knows retail can use some truly new infusion; some true thinking outside the box; maybe well beyond selling their products since they obviously don’t need another distribution channel. One did recognize NikeTown’s motives, and assuming they’re as smart as their cash is large, that may be far more a driver for Microsoft than following Apple. Microsoft needs an image lift, a public relations makeover no less. NikeTown was a great and timely move to take the brand into their own hands; to move it well beyond the shoes and shirts on the shelves of your local sports store. It connected as entertainment, cool, a tourist draw. It didn’t matter whether it made money in the same vein as the Gap down the street; it helped… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
11 years 4 months ago

On the one hand, I think it makes a lot of sense for tech companies to establish their own retail presence. With all of the churn in the retail electronics sector, creating your own retail identity is a sound way to protect brand integrity and margins.

On the other hand, the strategy is certainly no sure thing. Obviously, Apple is the template, but Apple started from a strong, easily identifiable base of loyal customers who revered Apple for their quality and innovation. There are very few other companies that possess the level of cachet that Apple does.

George Whalin
Guest
George Whalin
11 years 4 months ago

The marketplace for computer and other digital products will continue to expand when this recession is over. But, whether Microsoft can put together a viable retail business is questionable. Any comparisons to Apple and the success they have enjoyed is poor idea. Well before Apple opened a single store they had a strong, loyal customer base that enjoyed a relationship with the company that was unique in the computer business. Anyone who attended the Mac Expo’s during those years could see how rabid Apple customers were in their relationship with the company.

Without that fiercely-loyal customer base, I am skeptical of Microsoft’s ability to pull this off.

Shah Karim
Guest
Shah Karim
10 years 5 months ago

Microsoft is taking the play right out of Apple’s play book and I think it is a good idea. They know the system has worked. When you have a cross channel marketing campaign, you will essentially strengthen your brand awareness and visibility. My question is, now that they will have stores, what types of Microsoft Consumer catalog magazines will they offer and will they have a versioning system set in place to decipher what ads and products work better in different locations?

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